Credit cards are popular because they are easy to use and convenient. Credit card use amongst millennials, the generation of people born between 1982 and 2004, is relatively high. According to a study by FICO, one in three, Millennials carries a monthly credit card balance between $1,000 and $4,999. Additionally, according to FICO, consumer research shows that 83 percent of Millennials (25-34 years old) use credit cards to fund their lifestyle.” This presents a risk to their financial future if credit is not used responsibly.
Given this risk, it is best to be aware of some of the most common credit card mistakes so you can develop a strategy to avoid the credit card debt trap. Here are some common credit card mistakes that Millennials make and strategies to avoid them.
Keeping too many credit cards. According to the FICO study, about 50% of millennials have between 3 – 5 credit cards. Too many credit cards may increase the temptation to make unnecessary purchases that you cannot afford. Therefore, it is easy to become overextended and unable to meet your financial obligations.
Signing up for the wrong credit card. There are many types of credit cards available with a variety of different terms and features. Research the features, benefits, and costs of the credit card before you apply. You should select a credit card that meets your needs and best meets your financial status. Rewards are nice but do not solely choose a card for the promotional offers and rewards. Read all the terms and conditions carefully, because some cards come with hidden terms and charges that increase the cost of your purchase and ultimately offset any savings or benefits that you may receive with any promotional offers and rewards.
Aisha Taylor is the founder of FNPhenomenal–a movement designed to help single moms build financially phenomenal futures by developing the faith to believe that phenomenal living is their reality and acquiring the knowledge and tools needed to achieve their desired goals.